In his speech to Congress, Obama said he wants to reduce payroll tax (the US equivalent of NI) from 4.2% to 3.1%. If the plans are approved, it’ll be the second time payroll taxes are reduced – they were cut 6.1% last year, but that was due to expire in December. Businesses will get a similar tax cut, too – with the pricetag of both measures combined expected to reach $240bn. Other ideas included $85bn worth of aid to local and state governments, to keep public sector workers in jobs, and another $50bn for infrastructure projects. There will also be tax breaks for businesses taking on new employees – which will no doubt go down excellently among small businesses.
Obama’s main point was that Congress needs to act fast – and to act fast, it’ll have to, ‘stop the political circus’. Obviously, with an election due next year, that’s going to be easier said than done – but the President insisted he had included measures which should be approved of by both sides. ‘Everything in here is the kind of proposal that’s been supported by both Democrats and Republicans – including many who sit here tonight,’ he said. And early indications are that the Republicans will, if not approve everything, certainly give the majority of measures the nod. John Boehner, a Republican congressman and the speaker of the House of Representatives, said the plans ‘merit consideration’. Which sounds like cautious approval to us.
Of course, it’s not just on that side of the Atlantic that people are anxiously awaiting the outcome of the vote over the plans (likely to take place later this month). Let’s not forget the knock-on effect that Congress’ political in-fighting had at the beginning of last month, when its inability to agree on a course of action to reduce US debt levels led to a shock downgrade on its credit rating by agency Standard & Poor’s. Which, in turn, caused shockwaves in economies around the world. So all eyes will be on Congress over the next few weeks.
What’s clear is that Obama’s oft-repeated refrain during the speech that ‘you should pass this act right away’ had more than just a note of urgency to it. Although things are looking encouraging: Eric Cantor, Republican leader in the House of Representatives said ‘Let’s do the things we agree on, set aside the things we differ on and get to work so we can have some results for people who are hurting so badly out there.’ That bodes well. Let’s hope Congress has, for now, said goodbye to the circus.